Oregon Office of Economic Analysis

Over the past year a cross-agency team has identified and geocoded current and former mill sites in Oregon. The team is made of brownfield program managers from DEQ and OHA, folks from DLCD, Business Oregon, and Portland State researchers. Their ultimate goal is to find ways to repurpose some of these sites, however you first have to identify them. I was brought in to provide a summary and outlook of the timber industry, largely based on our office’s 2012 report. I argue that report is one of the most informative pieces our office has done. It also continues to be quite popular as web searches for things like “1970s Oregon timber history” are a daily occurrence. For these reasons it was time to update our Oregon timber industry work. What follows is an industry recap and a new set of slides.

In the 1970s when annual Oregon timber harvests totaled more than 8 billion board feet, the industry was a huge economic force. The sector directly employed 80,000 or so workers at wages some 30% above the statewide average. As such, the timber industry accounted for 1 out of every 10 private sector jobs across the state, 12% of state GDP, and 13% of all private sector wages. While there were timber-related jobs in every part of the state, these impact figures were considerably larger in many rural communities, particularly in eastern and southern parts of the state.

Beginning with the severe early 1980s recession the industry has undergone massive changes. At that time the industry restructured as interest rates soared and the housing market collapsed. Many of the existing mills had come to the end of their life cycle and needed to be retooled. There was also increased market competition with lumber coming from southern U.S. states and British Columbia. The result by the end of the 1980s was a more efficient, yet smaller in some ways industry. Harvest levels and output had returned but employment never recovered: industry jobs in 1989 were 17% below 1979 figures. Then the federal restrictions took hold, sending the industry on a downward spiral that was only briefly, temporarily interrupted during the go-go days of the housing bubble.

Today, annual Oregon timber harvests are a bit less than 4 billion board feet. Some of the decline is due to the age and stock of the forests; you can only cut old growth once. Private harvests are down 20% since the 1970s, however, by far the biggest driver is that logging on federal lands is down nearly 90%. Direct industry employment is now about 30,000, or a decline of 60 percent. Due to automation, increased competition, large supply of former industry workers and the like, wages have stagnated. Today the industry average wage is equal to the statewide average. Timber-related jobs are still middle-wage jobs, however they no longer pay a premium like they used to. These same trends impact manufacturing overall.

The industry outlook at this point is pretty steady. Demand for raw logs from China is ebbing some, however the ongoing U.S. housing recovery is encouraging. Our office’s expectations, based on input from our advisors, is for both harvest levels and employment to hold steady around levels seen today. We likely need a big event to drastically change the outlook. To the upside such an event would be a change in federal policy, specifically larger timber harvests, not the Canadian lumber tariff. To the downside we’re looking at a recession, particularly one where housing dries up. Given the fundamental underbuilding of housing in recent years, this not entirely a foregone conclusion next recession. It depends some upon the nature and severity of the next business cycle. Furthermore, as noted the other day when discussing natural disasters, the loss of forested lands can impact future economic growth as you cannot log a forest that no longer exists. Of course it matters where such land is located and who owns its.

Finally, a few additional notes.

• First, the economic shock the Timber Belt has taken is not unlike what the Rust Belt, Corn Belt and old textile mill towns in the south experienced. However, people moved away from those places when the jobs left. In the Timber Belt, people keep moving in. Furthermore, even as the 1990s were largely characterized by a strong national economy, poverty rates throughout much of the Timber Belt actually rose.
• Second, our office talks about the Changing of the Guard from a statewide preservative. The rise of high-tech has pretty much directly offset the decline of the timber industry. Of course this isn’t entirely a fair comparison, and the geographic location of these jobs are considerably different. One advisor notes that it doesn’t have to be an either/or situation. Why can’t we have both sectors strong?
• Third, Gail Krumenauer at the Oregon Employment Department has dug through the data to better account for industry employment. Gail finds some 55,000 industry jobs statewide in 2015. This is very likely a better estimate to use. However that work uses a broader industry definition than we use, but more importantly Gail does a really good job of identifying independent contracts and the like, along with public sector employees tied to the forest sector. That does make reconfiguring the data backwards more challenging than our office’s work presented here. That said, there is no question that whatever data series and estimates one uses, the long-term trends remain the same. Do read Gail’s work for a more detailed account of the current landscape of employment.